When can my SMSF start paying me a pension?

Once you've met a condition of release — usually retiring after preservation age (60), turning 65, or starting a transition-to-retirement pension between 60 and 64.

What is the transfer balance cap?

The transfer balance cap limits how much super you can move into the tax-free retirement (pension) phase. For 2025–26 it's $1.9 million per member. Amounts above the cap must stay in accumulation phase (taxed at 15%).

Are SMSF pension earnings really tax-free?

Yes. Investment earnings on assets supporting an account-based pension are taxed at 0% — no income tax, no capital gains tax — provided the fund complies with the minimum pension rules each year.

Do I have to commute my whole balance into a pension?

No. Many trustees run a hybrid — part accumulation, part pension. easySMSF tracks the segregation so the tax-exempt portion is calculated correctly each year.

What happens if my pension balance exceeds the cap?

The ATO issues an excess transfer balance determination. You must commute the excess back to accumulation phase and pay excess transfer balance tax (15% in year one, 30% if it persists).

SMSF in retirement

SMSF pension phase: the rules in plain English

By Tim Roff, Founder & SMSF Specialist · Updated 29 June 2026

Moving your SMSF into pension phase is the moment your fund stops paying 15% tax on earnings — and starts paying you an income. Here's how it works.

EOFY Special — 50% off SMSF setup

Offer ends midnight AEST, 1 July 2026. Applies to Individual and Corporate Trustee setup fees.

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From accumulation to pension

An SMSF spends most of its life in accumulation phase — earnings are taxed at 15% (10% on long-held capital gains). When a member meets a condition of release, the fund can commence an account-based pension for that member and the assets supporting that pension stop paying tax on earnings entirely.

The catch is the transfer balance cap — currently $1.9 million per member for 2025–26. That's the maximum you can move into pension phase across your lifetime. Anything above stays in accumulation and continues to be taxed at 15%.

Each year the fund must pay you at least the minimum pension amount based on your age (4% under 65, rising to 14% at 95+). easySMSF calculates this for you every July and reports the events to the ATO via TBAR.

Pension-phase earnings: 0% tax (vs 15% in accumulation)
Transfer balance cap 2025–26: $1.9m per member
Minimum pension drawdown: 4–14% depending on age
Pension events reported to ATO via TBAR within 28 days of quarter end
Hybrid funds (part accumulation, part pension) are fully supported

Frequently asked questions

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